March 3, 2025 • 45 mins
Dive into the intriguing world of endowment investing as we explore the performance strategies of Yale University, one of the top-performing institutions. With unique insights from experts, we dissect why Yale's model has consistently outperformed traditional portfolio allocations and what lessons everyday investors can apply to their financial strategies.
In this episode, we take you through an analysis of Yale's innovative investment strategies, including their remarkable asset allocation, which noticeably differs from common practices. You’ll learn about the advantages of tax-exempt investing, and how these long-term strategies can serve as guiding principles for individual investors looking to optimize their own portfolios.
We also introduce the concept of the Endowment ETF, a new vehicle that aims to democratize access to sophisticated investment strategies previously reserved for elite investors. By providing an opportunity for diversification and efficiency, this ETF could reshape the current landscape, allowing more people to benefit from strategies that have stood the test of time.
Join us as we navigate critical market trends and discuss investor psychology throughout various political landscapes. This episode not only informs but also inspires listeners to reconsider their approaches to investing. Subscribe now to ensure you never miss a chance to enhance your financial literacy!
DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of Cambria and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
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Episode Transcript
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Speaker 1 (00:00):
So these endowments, these institutions, have access
to the best money managers inthe world, they have the most
resources, and CalPERS is theone that we often talk about
here, but they can't outperformessentially a basic buy and hold
allocation, which is why weoften say, calpers, you should
just fire everyone.
I've offered to be the CIOmultiple times for free.
Fire everyone, buy some ETFsand be done with it.
(00:21):
But they chase this elusive,you knowusive, carrot of trying
to be like Yale, and so thequestion we ask in this paper is
like is there something specialin the water in New Haven, or
can we replicate some of whatYale's doing?
Speaker 2 (00:35):
My name is Michael Guyette, publisher of the Lead
Lag Report.
Joining me here is Mr Meb Faberof Cambria.
This is a sponsoredconversation.
Cambria is a client of mine.
Meb, I know a lot of peopleI've introduced you to are like
oh yeah, I've followed your workand read your stuff for a while
.
But I want to touch on a recentpaper you put out which is kind
of an update to a book that youput out 15 or so years ago, and
(00:58):
I remember this book on theinvesting like an endowment,
investing like the Yale model,the Swenson sort of mindset, the
liquidity you know, premiumsand things like that.
So I want you to talk about,first of all, that book from 15
years ago and what exactly thisnew paper is about.
Speaker 1 (01:14):
Yeah Well, to be clear listeners, I didn't tell
Guy that he had to take a redeye.
I mean to me, unless you'regoing to europe or like asia or
something, it's, it's a hard, no, uh so you know, I always say,
I will not relent.
But this bookcase turns into abed, by the way listeners.
So, uh, anyway, um, it'll begood to see you.
(01:37):
Um, yeah, you know, it feelslike two years ago I was talking
to somebody.
I was like, yeah, we wrote thisbook, you know, a two years ago
I was talking to somebody.
I was like, yeah, we wrote thisbook, you know, a couple of
years ago.
And then I was like, wait,actually just kidding, it's like
15 years ago and it was kind ofa spin out, longer version as
my first book and it was a spinout of our first white paper, a
quant approach, tactical assallocation, which is going to
(01:58):
hit, I think, a 20 yearAnniversary next year, which is
insane, and it's now dropped anumber two all time on SSRN.
So we got to, we got to publisha 20 year anniversary so we can
get it back up to number one,but anyway, ivy, what was the
point of that book for those whoread it?
Um, it was like, hey, how do wetake a look at these endowments
(02:19):
which has been crushing it,particularly Swinson?
But Harvard had a great trackrecord, you know, up till that
point, and they were pioneers,really in the 20th century too,
of this endowment style ofinvesting.
We'll talk about what thatmeans in a minute.
But really said, you know, um,what are the benefits of this?
And then what are some thingsthat people can do to try to be
like Yale?
Can we be like Yale?
(02:40):
Um, what are the downsides ofthe endowments?
And we talked about a lot offun tactical studies that Guyad
would love in this book.
We did, we talked about and someof these are more just for fun
but we talked about foreignlisted hedge funds.
If you guys remember, back in2008, 2009, you know, third
(03:00):
Point, greenlight, some, uh,pershing square today, you know
these foreign listed hedge fundscan trade like closed in funds
here.
So you could have bought DanLopes fund at like a 50%
discount to NAV Prettyincredible.
I mean, you can buy.
I think you can still buyAckman's at like a 25% discount
in AV today.
Um, there's some tax issues,but that was a fun part.
(03:22):
We did a years in a row down,like what happens if you buy an
asset class when it's down three, four or five years in a row.
Uh, humorously, since then,we've had a few industries that
have been down six years in arow coal stocks, uranium stocks
over the past decade and thisyear for the first time, I think
.
I mean, it's a tiny subindustry, but cannabis stocks
(03:43):
are down nine years in a row andwe manage a cannabis fund, so
we totally understand that.
Speaker 2 (03:51):
And you're keeping it going.
Man, I give you credit.
Speaker 1 (03:53):
Yeah, well, we're going to be the only one left
standing.
Eventually.
You know, everything goes down99%, we'll be the only ones left
, but we've been helped becausewe've got a lot of tobacco
companies in there.
So, anyway, and uh, we've beenhelped cause we get a lot of
tobacco companies in there.
Um, so anyway, and tobaccocompanies, oddly enough, have
been ripping for the past year.
Um, most of what I'm talkingabout is not related to
endowments, but so what was theoriginal?
(04:13):
What does it mean to be anendowment, endowment, investing?
So, first of all, endowmentsare sort of like you and I and
sort of different.
The first thing, you knowthey're tax exempt.
Maybe not for long it's newadministration, who knows but
we're currently tax exempt, soyou can do other things.
If you're tax exempt, you don'thave to worry about pesky taxes
.
Second is their time horizon isliterally kind of forever.
(04:34):
So let's say, you're Harvardand Yale.
I mean, you do have currentstudents, you have current
administration employees, butalso you have future students
and future ideas, and many ofthese endowments have grown to
be $10, $20, $30, $40, $50billion, and so the amount of
returns and interest they spinoff is non-trivial.
We may see a scenario and thisis a sign of the times, too,
(04:56):
that Texas endowment is reallycompeting to get close to being
the largest in the worldhopefully largest in the US,
excuse me, soon, anyway.
So what have these endowmentsdone historically?
Well, they've historically beenequity focused.
And what does that mean?
Because they have a long timehorizon, their number one enemy
(05:17):
is inflation and bonds.
Historically, you don't get awhole lot of step up premium
over inflation, right, you get alittle bit extra returns
Equities historically.
The problem with equities, ofcourse, is they're volatile.
You can lose 50%, createdepression, you lose 80%, things
like that.
They also diversify.
If you look at the portfolios,it's not just US stocks, s&p,
(05:38):
it's global stocks, it's globalfixed income, global real assets
.
And then the biggestdifferentiator between you and I
is usually the alts bucket, andhistorically that's meant a lot
of different things.
Harvard, back in the day wasearly in September.
Yale has been famous for itsprivate equity venture capital
(05:59):
allocations.
If you look at the Yale annualreport and you're like, oh my
God, meb Gaiad, they got 2% inUS stocks.
Are they crazy?
Well, and you're like, oh myGod, meb Guy, like they got 2%
in US stocks.
Like, are they crazy?
Well, you're like, well, theygot like half in private equity,
VC stocks in general.
So you know those are stillquote businesses and stocks.
They're just privately traded.
(06:19):
So anyway, in this book we saidyou know, could we, um, could we
come up with a public portfoliothat tracks the endowments?
And how does it do?
What can we do to improve it?
Now, the biggest, probablyAchilles heel of the endowments
that came out during thefinancial crisis was illiquidity
.
So if you're managing for along-term time horizon but you
have short-term cash needs andor a short-term part of the
(06:42):
portfolio that's super liquid,that's a huge part of the
portfolio, and all of a suddenyou have capital calls et cetera
, you can get in deep troublequickly and a lot of them did.
But once you burn your hand onthat stove, you learn how to
manage your cash flows andilliquidity better.
Anyway, we decided to write apaper recently called Can we All
Invest Like Yale?
(07:03):
It's on the camryinvestmentscomwebsite.
We'll kind of talk a little bitabout it today.
But, walking forward, you knowthe past 15 years since
publication of this book.
What's changed?
What's the same.
I mean, I think the biggestthing is arguably the greatest
of all time of capitalallocators in our lifetimes.
David Swinson passed away, youknow, and his, his helm during
(07:25):
this time at Yale from 1985 to2021, is is, you know, one of
the best, best streaks inhistory.
So we can get into parts of theparts of the paper how that
applies to everything today.
That's just kind of the generaloverview of the old book and
what's going on.
Speaker 2 (07:42):
Yeah, there's this concept out there that when a
research paper comes out or whensome book comes out documenting
some investment strategy orstrategies, that whatever alpha
was discovered in the researchbehind that suddenly goes away.
Right Now it's in the publicdomain.
How have endowments in generalperformed, you know, following
(08:08):
that book?
Yeah, especially in the QE3Zerp era to where we are today.
Speaker 1 (08:13):
We got a bunch of links in the in the appendix of
our paper to a bunch of otheracademic papers.
A lot of people written aboutthis.
You know the period, sort ofpost-2000 decade, really golden
era of endowments, but saiddifferently, it was a golden era
of anything that's not the S&P.
So, financial advisor man, youdid amazing during the mid-2000s
(08:39):
because REITs did great, golddid great, bonds did great.
Small cap did great Gold didgreat, bonds did great.
Small cap did great Value didgreat, on and on and on.
Private equity VC did great.
Everyone got hammered in 08,with exception of trend and
managed futures.
Anyway, since then, what'shappened?
We've talked about this on aprevious stream.
S&p has crushed everything.
It has just been an absolutehaymaker just 15% per year.
(09:03):
And that doesn't mean thatallocations have done poorly.
And we look at different timeperiods in this paper.
And so one of the big takeaways,by the way, is everyone wants
to look like Yale, right?
So every endowment, everypossible institution CalPERS,
who I love to pick on everyonetries to gravitate towards this
endowment model of investing.
(09:23):
But if you look at Yale versusthe average endowment back to
1985, and these, by the way,listeners, all these
institutions, for some unknownreason, report their fiscal year
ending June 30th.
So if you look at some of thecalendar year metrics they won't
quite match up.
But the average endowment did8.8% per year.
(09:44):
Solid.
That's a great return.
Did it with reasonablevolatility 10% a year.
Again, you're only looking oncea year, so it kind of masked
some of those entry yeardrawdowns.
Sharp ratio 0.5.
Worst year 20%, greatallocation.
But instead of 8.8, yale didover 13.
That is a big fat difference,right, A little more volatility.
(10:06):
Sharpe ratio up around 0.8.
So solid Sharpe ratio, butworse year a little higher.
And then 60-40 did 10%, s&p did11.8.
So S&P and 60-40 beat theaverage endowment, and let that
sink in for a minute.
So these endowments, theseinstitutions, have access to the
best money managers in theworld, they have the most
(10:26):
resources, and CalPERS is theone that we often talk about
here.
But they can't outperformessentially a basic buy and hold
allocation, which is why weoften say, calpers, you should
just fire everyone.
I've offered to be the CIOmultiple times for free.
Fire everyone, buy some ETFsand be done with it.
But they chase this elusivecarrot of trying to be like Yale
(10:48):
.
And so the question we ask inthis paper is like is there
something special in the waterin New Haven, or can we
replicate some of what Yale'sdoing?
Swenson himself in one of histwo books.
He wrote two fantastic booksPioneering Portfolio Management
and Unconventional Success.
I think it may have justmurdered the titles, but in his
books he says look, here's whatindividual investors should do.
(11:11):
They should put 20% in usstocks, 20% in foreign stocks,
10% emerging markets.
By the way, listeners just hearwhat he said.
He said 30% in foreign andemerging, 20% in us.
No one does that, by the way,right?
Everyone's like all us S 20%REITs, 15% US bonds and 15% tips
.
Okay, solid allocation.
We tested this out in our globalasset allocation book, which is
(11:34):
free online.
We also teased out theallocations in the Ivy portfolio
book where we said let's takeout the hedge fund component
they call it absolute returnbecause that can mean all sorts
of different stuff and we'lljust call private equity venture
capital stocks and then we'llnormalize the portfolio.
And that ended up being 50%stocks, 15% fixed income, 35%
(11:58):
real assets almost identical toSwenson's portfolio.
So these portfolios and wecalled one in the book and the
paper Ivy, which was just foryou guys know me, I love
simplicity and rounding, so Isaid 20% in each in US stocks,
foreign stocks, bonds, reits,commodities, just trying to
simplify.
And anyway, the point of allthis is, if you looked at these
(12:18):
portfolios that we, that youknow these kind of investable
benchmarks that cost zero, andtake it back to 1985, you end up
so remember the averageendowment 8.8, yale 13, you end
up at 9.6.
So better, better than theaverage endowment, better Sharpe
ratio, and largely because theaverage endowment just pays more
(12:42):
in fees.
Ennis, who writes a lot aboutthe endowments, is very critical
about their attempt to try tofind this elusive alpha.
He says, look, they pay like 3%for these private allocations
and he calls it I love thephrase an impossible burden,
anyway.
So Swenson and the beta doesn'tquite get there right.
(13:06):
So it's good, look, 10% returns.
Everyone like there's nothingwrong with that, but it's not
quite Yale.
Better than the average now,but not quite Yale.
So we said, look, can we try toattempt to do some things?
And I get that this ishindsight bias.
We understand fully that thiswe're looking back I mean
Swenson and Harvard back in theday.
(13:29):
Harvard's also a case study ofkind of not what to do.
By the way.
The impossible task of allthese different hands being in
the cookie jar.
All the alumni is like this isintolerable, we can't take this.
They're underperforming,they're doing a terrible job and
(13:49):
then if the endowment doesgreat, they're like they get
paid too much.
It's really funny to watch andover the years, if you search my
blog for Harvard, you can findall these articles.
Anyway, but the biggest alphais they made these decisions at
the time, right.
So Swenson, the fact that hedecided to do private equity and
VC in the 80s and 90s right.
(14:11):
That decision has a massiveamount of alpha versus today.
When everyone does it today Onand on, it's like this
transition from former alphasources which you referred to,
right.
Like there's a trade right nowthat I love that I can't talk
about because it's a direct arbwhere the more people in, the
(14:34):
worse it gets, and longtimefollowers of me can probably
guess what this is for 2025because we've talked about it
before.
But I don't want to talk aboutit because every person I
mentioned it to it makes thetrade worse.
But that's the same thing withyou know kind of what they've
done and what what Swinson hasdone.
Speaker 2 (14:51):
Well, which, by the way, I mean it's just a classic
argument of you know you need to.
You get out for inefficientmarkets and the more
accessibility anddemocratization there is of I
had an old buddy, peter Mladina,who is a Northern Trust super
(15:13):
smart guy.
Speaker 1 (15:14):
He wrote an old paper .
It's basically like can wereplicate Yale, with the full
knowledge that they kick ass atprivate equity in VC?
It's massive alpha.
And so, you know, can wereplace all the equities with
stuff like shareholder yieldvalue?
You guys know I love momentumfactors, so we went through this
(15:35):
in the paper and said we calledit Swenson plus, you know,
taking a factor approach.
And so it adds like a percent ayear, which is kind of what we
expect.
If you replace your equities,take away market cap weight and
you do something like value orfactor base, but it does still
doesn't quite get you to thatmagical 13%.
But if you know anything aboutprivate investing is many of the
(15:57):
funds are either implicitly orexplicitly leveraged, right?
If you do private equity, thosedeals are leveraged.
By the way, if you just investin stocks the S&P 500, those
companies are leveraged, right,they have debt on their balance
sheet.
If you do derivative strategies, you do long short equity, you
do all sorts of these variousstrategies.
Many have embedded leverage.
(16:18):
So we said, well, could we addsome leverage to this portfolio?
And where does that take us.
So the good news is it can getyou up to that 13% return.
Good news is it can get you upto that 13% return right.
So you leverage it about oneand a half times.
So 150% gross takes you up toalmost 14%.
(16:39):
Now of course, the volatilitycomes up and a lot of people
like to argument that, arguethat a lot of the private
investments tend to smooth thereturns.
Right, if you own a bunch ofbuildings downtown Manhattan,
you own a bunch of privateequity like you don't have to
mark those every day.
And Cliff Haslund and otherstalk about this volatility
laundering.
It's one thing.
If you have a private equityfund and say it's, you know, hey
(17:00):
, look, this is probably 20% vol.
But if you're marketing and Isee these like you guys don't
send these to me, marketers,cause I will just call you out.
But if you're like, hey, thishas 5% volatility, I'm like no
one believes that.
You know it doesn't have 5%volatility.
I know it doesn't have 5%volatility.
And here's a fun proof Pacerjust launched a private equity
venture capital replication ETFand to achieve the returns of
(17:23):
private equity in VC, you knowhow much that thing is leveraged
Two and a half times.
So the leverage is not just not15% or not seven, it's like 40.
So, anyway, so you mask alittle bit of the volatility.
But in this paper we say, look,we replicate these return
(17:43):
streams and the worst yearcharacteristic for Yale was like
minus 20, but entry year wasdown 50, right.
So very similar to assetallocation portfolios 08, 09.
So, anyway, we think you canget to that 13% alpha number
with leverage.
The volatility I think it'stolerable, right, 18% sharp
ratio is decent, it's not likeone or two.
(18:04):
And like we show in the paper,we're like look at this most
recent period where you know USstocks from like.
Look at this most recent periodwhere you know U S stocks from,
um, you know, uh, what is this?
Uh, you know 2010 to 2024 of asharp ratio above one.
If you're a hedge fund, you'remarketing that for the past 15
years you're a billionaire,right, so, um, but anyway, you
know it's, it's, it's anaggressive allocation strategy.
(18:27):
It's not something that I thinkyou would expect to say, hey,
look, this is never going tolose money, this is never going
to go down, but you know it's,it's, uh, it's got a little
spice, but it's globallydiversified.
And if you have a time horizonand you're honest about it.
You're like no, look, my timehorizon is 20, 50, a hundred
years no-transcript portfoliosover time.
(19:24):
They all do about the same andyou know, it doesn't even matter
how much this is.
This was kind of the hugetakeaway from our global
allocation book.
If you're just doing buy andhold now, you have to have all
the main categories.
If you totally leave out one ofthe main categories and I'm
talking about global stocks,global fixed income and global
real assets usually it'ssuboptimal.
(19:46):
So you can't just leave outreal assets, because the 70s
would have just woodshedded youRight, um, but, but but.
Then it doesn't matter exactlyhow much.
Should you have 5% in gold or10%, doesn't really matter um,
on and on, so, um, over the fullcycles in our and we're going
to update this book and take itback to the 1920s as opposed to
1970s of our first book Um.
(20:11):
However, the path is differentand the reason that people sweat
asset allocation so much and sooften is that, despite the fact
they all end up the same place,they all do like eight, 9% per
year or, said differently, like5% above inflation over time,
but they wiggle a lot in themain term.
So like that, if we looked at,like these 10 portfolios in the
book, the spread between theworst performing and the best
performing each year averagedlike 20%, right.
(20:33):
So some years like 2022, or1970s, 2008, 2009,.
You'll have some portfolio thatcrushes it and some that does
terrible, which causes people tobehave poorly, but over time it
doesn't matter.
But things like permanentportfolio did great, and
permanent portfolio isinteresting because at its core,
if you just did 25% each instocks, bonds, gold and cash I
(20:56):
think was the original idea it'sone of the few portfolios, I
think, that had real positivereturns in each decade, so it's
incredibly stable.
But because it has so much infixed income and cash, it's
lower vol.
So really to get higher returnsfor that portfolio, you need to
lever it up.
Mark Faber no relation has asimilar portfolio that's also
(21:20):
done really well, but so they'reall kind of similar.
To do things where you're goingto be kind of different, you
need to move further afield, andso we talk about value as a big
one.
But the big one for us is trendfollowing right, and so in this
endowment portfolio we show anadditional chart.
We say what if you lob trendfollowing into this allocation?
And, not surprisingly, it doeswhat you think it would do,
(21:40):
which is reduce volatility anddraw down to the rest of the
portfolio for, like, atraditional managed future style
allocation, but all theseportfolios are great.
You know, that's the thing Iwas like.
The takeaway from this paper isnot everything sucks and
everything's good.
All these portfolios are good.
Yale has just happened to begreat, and so will they remain
(22:05):
to be great.
Speaker 2 (22:07):
But hold on.
That's interesting, right?
Take the name Yale out of it.
In any data set you're going tohave anomalies, right?
I mean, is it just luck, is itjust an anomaly in the data set,
or is it Yale doing somethinglegitimately different?
According to the Nazi toolbar,even Yale has been.
Speaker 1 (22:24):
There's no question Yale has been special.
But then you look at, so one ofthe fun takeaways from our
paper.
We talk about this and I go andI'm going to just read it here.
So, as investors review thetables in this paper, many will
come to varied and possiblyopposite conclusions.
As the old wall street sayinggoes, that's what makes a market
.
I go, some paper, some, someinvestors will read this paper
(22:47):
and conclude the best way toinvest is just to buy us stocksS
, stocks, call it a day.
So for the past 15 years, 60-40has beaten everything.
You look like a moron If youjust went to sleep 2009,.
You're like I'm just going tobuy stocks.
Dollar cost average in seey'all in 20 years.
God bless you.
You beat almost everybody,no-transcript.
(23:32):
And here's another quote fromWilliam Feather.
He says one of the funny thingsabout the stock market is every
time one person buys, anothersells and they both think
they're astute.
And so the same thing withallocation is everyone looks at
this and they're like, oh okay,well, clearly you should just
60-40.
So, yes, do I think Yale's beenspecial?
I do, but clearly you shouldjust 60-40.
So, yes, do I think Yale's beenspecial?
I do, but the million dollarquestion like will they be
(23:53):
special going forward?
Will they still be able tomagically command amazing terms?
Will they still be able to findincredible managers with much
more competition?
Was it just David Swenson, youknow?
Can his team replicate what hedid On and on?
So in Harvard, you know, it'skind of shown that the structure
and the people really matter,because they've been a basket
case and a lot of the smallerendowments over the past 10 to
(24:17):
15 years have outperformed,largely because most of them
just put it mostly in US stocksand market cap weight.
So the cycles, as you know andI know, they can outlast you
know our careers and they lastmuch longer than we often expect
.
So my point is you can kind ofget a lot of the way there with
just smart allocation, spread itout, add a little leverage and
(24:40):
then throw in some good ideaslike value and trend as well.
Speaker 2 (24:46):
Speed value and trend Value really hasn't had much of
a trend.
Yeah, Largely because of techright being the main driver of
the trend, and that's moregrowthy Well it's interesting.
Speaker 1 (24:55):
There's some areas of the world where it's, you know,
if you look at foreign andemerging and we posted a good
chart to Twitter not too longago from Goldman and it showed
that European banks haveoutperformed the MAG-7 since
2022.
Now it's obviously acherry-picked time horizon, but
it's interesting and Europe'sdoing great this year and a lot
(25:16):
of the cheap global countriesare up well into the double
digits.
So will that rotation last?
Usually, the foreign rotationlasts about a month, so we're
getting long in the tooth herefor US stocks to just come back
and start waxing everything.
But you never know.
Um, the cool part about thiswhole day idea, you know, is um,
I wanted to take out a hugebillboard in front of CalPERS
(25:38):
headquarters in Sacramento andsaid you know what?
You guys forced my hand.
I tried to help you.
I applied for your CIO jobthree times.
You wouldn't even, uh,recognize me with a turning me
down.
Uh, you know, you wouldn't evenstart.
You wouldn't even recognize mewith a turning me down.
You wouldn't even have me foran interview.
So you know what?
Let's make this a bet.
(25:58):
I'm going to launch an ETF.
Just a low-cost ETF publiclytrades everything.
See what's in it and let's findout.
Can you beat me?
We're going to find out.
I might have to take it out andadd in Barron's and say, look,
let's find out.
And so, anyway, we're launchingEndowment ETF in April, so
right around April 10th.
We're putting this to work inthe real world.
(26:22):
So this is going to be aleveraged aggressive allocation
with ETFs, no management fee andonly the underlying fees of the
ETFs in the component.
And we'll see.
Every June 30th.
Maybe we'll hold a party andsee if the institutions can keep
up with this low-cost,investable benchmark.
And my offer stands CalPERS,happy to come run it for you.
Speaker 2 (26:47):
A lot of alpha comes from rebalancing, typically
right.
So talk to me about rebalancingon the endowment portfolio,
Swenson's a big proponent ofthat.
Speaker 1 (26:57):
You know we call it rebalancing alpha it.
More than anything, I think itjust keeps you on track of your
process, and for someone whobought 6040, say, in 2009,
you're not 6040 anymore.
For someone who bought 60-40,say, in 2009, you're not 60-40
anymore.
You're probably I don't evenknow what 80-20 at this point,
and so rebalancing matters.
As long as you do it sometime,I don't think you need to be
(27:21):
super sophisticated about it.
It's just that you need to doit if that's what your mandate
is and that's what I think isimportant about this type of
strategy.
So the more components and thevaried they are, probably the
less you need to rebalance.
But if you have things in therethat are super volatile so like
, look, you got a bunch ofbitcoin in there um, you know,
if you had a big bitcoin 60, 40gold's, now creeping on 3000 are
(27:45):
we there yet?
I don't think so, getting closeanyway, um, but yeah, I, I mean
investments that that arevolatile and then make these
huge runs you have to rebalanceor else you end up owning and
that's the whole Achilles heelwith market cap investing right
Is you end up owning the mostexpensive things at the worst
possible time to own them.
So you put most of your moneyin Japanese stocks in the
(28:05):
eighties.
You put most of your money inexpensive us stocks in the late
90s.
If you can break that marketcap link, I think it makes a lot
of sense and it's thoughtful.
So, yeah, these will rebalanceAgain.
I don't think you don't have todo it like once a week, once a
month even.
I think even for most peopleonce a year probably gets you
there.
But the nice thing about buyinga basket of ETFs is they
(28:26):
rebalance for you.
They do the work you know.
So if you're investing in ashareholder yield ETF, it's
going to rebalance quarterly.
If you invest in somebodyelse's whatever equal weight ETF
, it may be rebalanced onceyearly.
But they kind of like do allthe work behind the scenes, the
baking and cooking.
Speaker 2 (28:43):
You must be itching to see a value cycle, right, I
mean because I'm going to makethe assumption that the majority
of the funds under Cambria havethat, that tilt.
Speaker 1 (28:52):
So the older.
When we first started launchingfunds in 2013, you know I would
sweat what the market was doing.
I would pull up my phone, Iwould count the basis points,
right, we have 16 funds now,that kind of zig and zag, and I
fully have the understandingthat of those 16.
I mean we have US, we havelarge cap, we have small cap, we
(29:13):
have foreign, we have emerging,we have REITs, we have fixed
income, we have tail risks, wehave allocation, we even have a
crazy cannabis fund on and onRight.
So, uh, we have some, somehedged funds.
It's a pretty diverse lineup,and so that's good and it's bad.
It's good that you know usuallysomething is doing well.
It's bad that usually somethingis sucking it up too.
(29:35):
That all having been said, youknow, the worst, probably on a
relative basis market for us isS&P just creams everything.
Now it's good in the sense ourlargest fund is the US stock
fund.
So if the US stocks double fromhere, good, that's fine for us.
But on the trend side, webenefit from trends anywhere,
(29:57):
and so the trend in US stockshas helped all the trend funds.
No trends elsewhere has hurtthem, and whipsaw and sideways
markets have hurt those.
So it varies.
But yes, I mean, look as a quantand someone who follows the
value trade we definitelybelieve that value is in the top
decile of attractiveness tohistory.
(30:17):
That overlaps with some otherthings like small caps, mid caps
versus large cap.
Basically it's a it's a largecap, expensive, concentrated
story.
But everyone knows that, like Ifeel like that's well known and
people are kind of just dancingaround musical chairs waiting
for the music to stop.
And so part of me you know I'mstudent of bubbles I love uh
market history.
So we've now taken out on thecape ratio the um uh 2021 high
(30:47):
of at least intraramont of theCAPE ratio.
It was like 38 and change, Ithink, and so now we only have
the final boss 1999, left totake out.
So part of me wants to justtake that out because I never
thought I'd see it again in mylifetime Forget 20 years later,
(31:08):
right, 25 years later.
So part of me wants to see itgo totally nutty.
But the rest is waiting for areturn to sanity.
Speaker 2 (31:19):
Any chance at all that this time is actually
different just because of theautomated passive flows and smp
large cap that's.
Speaker 1 (31:25):
That's been well documented too, and yeah, hard
to disagree with it yeah, um,the problem with that argument
that I've always struggled withis that should be true
everywhere, and and so, um, Iget it and I think it's
reflexive.
I think it's true in sectorfunds, I think it's true in
(31:49):
active funds.
I mean, we saw it with Kathywood.
You know what helps you on theway up, it's going to hurt you
on the way down when it comes toflows and uh and and same thing
with sectors, on and on, Ithink it creates opportunities.
I mean, that's, that's howcountries get to single digit PE
ratios and how countries get to40, 60 PE ratios.
Right, it's like these, thesemanias and booms and bus, Um,
(32:13):
but eventually, you know there'sgravity takes hold.
It's just how far that rubberband gets stretched, and so,
like, could this last for a longtime?
Sure, you know it's.
It's just how far that rubberband gets stretched, and so
could this last for a long time?
Sure, it's happened.
If we look back in history Ithink you and I talked about
this before there's been fourperiods where stocks have done
15% per year for over a decade.
Now again, they're all in thehistory books, though they all
(32:33):
have names, and eventually theyend.
Now, sometimes they end quickly, like the 1920s and 30s.
Sometimes they end now.
Sometimes they end quickly likethe 1920s and 30s, sometimes
they end in a different way.
You know, the 1970s, the nifty50, set the stage for really an
inflationary, massive run-up inbond yields.
Very different market.
(32:54):
The 1970s, um, and then 1990stotally different too.
I mean that lasted three kindof slow rolling years, um, so
they're all different, I think.
But you know, we've seen it inforeign markets a million times
and it and it's um, it, uh.
The bricks back in 2007, indiaand China were trading, p ratio
(33:16):
is like 50.
Like 50, so higher than the uswas in 99 and and so, um, we're
right, like 38, which is, it'shigh and I think it's really
expensive and there's pockets ofsuper concentrated.
But to me it's not bubble.
Bubble to me, I mean, I've comeup with a very generic
arbitrary line in the sand is a40 pe, uh, but we're not, we're
(33:38):
knocking on it.
But.
But the good news is, you know,salesmen and me, we have a
solution for that.
Just wait, there's more.
But so a lot of people have been, you know, invested in us
stocks.
A lot of people have highlyappreciated us stock positions,
but they're kind of stuck.
You know they say I can't doanything with my video, I can't
sell it, taxman's going to killme.
And so historically there'sbeen very few choices for those
(34:02):
type of investors how they cansort of move out of their highly
appreciated investments.
And we've finally come up withone and we talked about it, I
think, on one of these before a351 conversion.
So for this endowment ETF, youcan buy it after it launches,
same as any other ETF.
We're also allowing people tosee the ETF with their own
(34:22):
securities could be stocks,could be ETFs and get the ETF in
return in a tax-freetransaction, which is a pretty
cool innovation that we'restarting to see more and more of
.
So, listeners, if you'reinterested, you can always reach
out to me.
But that's a potential solutionfor a lot of people that are
concentrated and don't know whatto do.
I mean my mom.
Back in the day I would try tohelp her out with investments.
(34:42):
We'd talk about it.
She's like you know, I just ownthis GE, I can't sell it, tax
money is going to kill me.
I'm like mom, market's going tosolve this for you if you don't
sell it Right.
(35:10):
And it's like, eventually, thereception by some advisors, as
you explained, with 351 Exchange.
How intrigued, but it soundslike it's kind of a big
operational undertaking.
In reality it's really not thatbad.
Your client say, hey, explainthis to them, they're okay, sign
a docusign.
And then you just got to getlike an excel file with
positions and tax slot basis, sobasically a download, monthly
portfolio statement.
It's about it.
Um, but again, like it's likegoing to the gym, you know, it's
(35:33):
like every, every blockade youput in is like reduces
compliance by like 90.
So if you tell an advisor, yeah,you're gonna do that for one
person, cool.
You tell an advisor, yeah,you're going to do that for one
person, cool.
If you tell an advisor, you gotto do that for 100, you know,
not so cool.
So for highly concentratedpositions, I think it's been a
big unlock.
You know, for people who havean advisor has a handful of
(35:54):
accounts, I think it's a littleharder for them if they say,
look, we've been doing directindexing and we're stuck in
these frozen, calcifiedpositions after five, 10 years
of parametric and I have 500clients and I really don't want
to go do that work.
However, like it is a massivebenefit to investors If you
think about it if you've beeninvested in taxable accounts for
(36:16):
the past 10 years and all of asudden you're like all US stocks
, like that's the way.
If you look at the percent of US investors net worth allocated
to equities, it's the highestlevel ever and so historically
that's like the number oneindicator for next 10 years
returns.
In the opposite, you know it'sgot like a near perfect track
(36:38):
record as predicting the future.
So people were totally offsides and so that little bit of
effort can really, can reallyhelp.
You know there's two maincriteria.
You can't just give us 100% onestock.
The biggest stock can't belarger than 25% of the portfolio
, so it has to be somewhatdiversified, is what they call
it.
So that's, that's aconsideration to take into
(37:01):
account.
But ETFs are pass-through.
So if you got 25 million NVIDIAand 75 million SPY, that
probably works.
So it's more that no one'sheard of it.
So I gave a speech this week atthe Elks Club in SoCal.
It's actually the certifiedfinancial planner organization.
I actually had two or 300people there, but I said hey,
(37:25):
how many of y'all know what a1031 is?
Every single hand went up,right, no one didn't know what a
1031 would go.
How many of you guys have heardof a 351?
Zero hands went up right.
And these are CFPs Like theirjob is to be on top of taxes.
Financial planning, um, and soI think it's.
I think it's a big opportunityand value add for planners and
(37:45):
wealth advisors to take this toclients.
It's also big prospecting.
So if you're an advisor, Iguarantee you you know someone
who's got 50,.
Look, you can charge on mynormal portfolio, but you're not
charging on this $100 millionof Microsoft because I can't
(38:05):
sell it and there's nothing youcan do with it.
So if you ever find a solutionand can get me out of this,
great.
And so all of a sudden forfinancial advisors unlocking a
huge portion of business andthey never thought they would be
able to touch.
And again, direct indexing isanother one where they've kind
of sold this solution, but thenafter a certain number of years
they're like whoops, justkidding.
(38:26):
Now there's nothing to do withthis portfolio.
Now there's a solution for thattoo.
So we're excited.
We have endowment's going to bein April, we have another one
probably August, september.
Then we're going to kind of seewhat people want from there.
Everyone says they want USstock market beta right now and
I tell them I said you waitabout a month or two of the US
going down and we'll see if youstill want US stock market beta
(38:49):
after that.
Speaker 2 (38:50):
I made a point that the most contrarian trade now is
that under a Trump presidencyUS stocks ended up being the
biggest laggard.
Speaker 1 (38:59):
It seems like so impossible under trump, but
probably why it happens yeah,well, and that's the thing is,
like everyone, like I thinkpeople what were, what were they
talking about last trumppresident, that everyone just
would have assumed energy wouldhave been like an amazing sector
and I think it like did terror,was it used to.
Might have been you talkingabout this, but it's like.
It's always like what youexpect to happen may not happen.
(39:20):
My favorite part of this waswhen Trump got elected last time
and the futures just startedtanking that night and Carl
Icahn put his martini down andwent and bought 2 billion, and
then you had something like 17months in a row where the U S
stock market was up the firstyear, first calendar year in
history, where the market wentup every month.
So you never know what marketsare going to deliver us, right?
(39:41):
It's always surprising andthat's part of the reason we got
to be diversified and have alot of these approaches and
ideas baked in.
But what's going to happen?
You know the president'sadministrations.
They don't control thevaluation of stocks when they
inherit them.
That's beyond their control,right?
(40:01):
And so you know Trump'sinheriting one of the most
expensive stock markets inhistory, which is a tall order,
but I also think the president'sirrelevant to stock market
returns, but who knows?
Speaker 2 (40:11):
It's also interesting I mean I've seen the studies
that generally under Republicanadministrations the S&P tends to
underperform relative toDemocrats, which is
counterintuitive given tax cuts.
Speaker 1 (40:21):
But it's even funnier because half the time now the
Republicans were Democrats.
You know, it's like who knowswhat.
Speaker 2 (40:27):
Yeah, even the categorizations don't even make
sense at this point.
Speaker 1 (40:30):
Yeah.
Speaker 2 (40:31):
I think it's exactly right, matt, for those who want
to learn more about theendowment portfolio when it's
live, and then the 351 exchange.
I know you're doing a fewwebinars, doing a few webinars,
doing an webinar with me as well.
Yeah, talk to me about sort ofthe different sources people can
educate themselves on.
Speaker 1 (40:43):
If you go to my Twitter account, you can see
somewhere in the feed.
Uh, we're doing a webinarThursday where we're going deep
on this.
Um, you can always email me onCambria funds or Cambria
investments.
There's a lot of information.
Uh, there's three 51.
There's 351 tabs that have FAQs, overview of the approach.
It goes pretty deep.
We got videos, podcasts, allsorts of information to educate
(41:06):
people.
That's much like you.
That's our big calling card.
We want to make sure everyoneunderstands what they're
investing in.
My nightmare is having aninvestor that doesn't know what
they're investing in, and so wespend an inordinate amount of
time trying to educate throughany medium at this day and age.
Uh, go across any possiblevideo text.
Uh, you can email me.
(41:27):
You can find us on LinkedIn.
You can go buy the old Ivyportfolio book.
You can download a zillionwhite papers for free.
There's a million resources.
If you just uh look hard enough, you can find a find all of
them.
Speaker 2 (41:38):
By the way, I give you a lot of credit.
I mean, you know you've got abig firm, you've got a number of
people working for you, butyou're still the guy that's
often out there communicatingthe most and doing one-on-one
meetings.
Speaker 1 (41:49):
As you know, guy, the life of an entrepreneur, it's
all hustle.
Someone asked the NVIDIAfounder and CEO.
I think it was no, was itNVIDIA?
CEO?
I think it was.
No, it was Nvidia.
No, it was no.
Sorry, it was um, it was adifferent profile of a Korean
CEO, but it doesn't matter.
But they said, um, you know howmany hours do you work per week
?
And he answered all of them.
(42:09):
You know, it's like.
It's like the entrepreneurmindset the owner is not one
that you just flip off on Fridaynight and turn back on Monday
morning.
You know it's an always-onmentality, but we love it, like
it's a lot of fun too.
I don't, you know, it's likeWarren Buffett skipping to work,
and so we always never a dullday in our world.
Speaker 2 (42:30):
Yeah, ain't that the truth?
Appreciate those that watchthis.
And, Meb, I will see youtomorrow.
Speaker 1 (42:35):
Great See you bud.
Speaker 2 (42:37):
Cheers.
So these endowments, these institutions, have access
to the best money managers inthe world, they have the most
resources, and CalPERS is theone that we often talk about
here, but they can't outperformessentially a basic buy and hold
allocation, which is why weoften say, calpers, you should
just fire everyone.
I've offered to be the CIOmultiple times for free.
Fire everyone, buy some ETFsand be done with it.
(00:21):
But they chase this elusive,you knowusive, carrot of trying
to be like Yale, and so thequestion we ask in this paper is
like is there something specialin the water in New Haven, or
can we replicate some of whatYale's doing?
Speaker 2 (00:35):
My name is Michael Guyette, publisher of the Lead
Lag Report.
Joining me here is Mr Meb Faberof Cambria.
This is a sponsoredconversation.
Cambria is a client of mine.
Meb, I know a lot of peopleI've introduced you to are like
oh yeah, I've followed your workand read your stuff for a while
.
But I want to touch on a recentpaper you put out which is kind
of an update to a book that youput out 15 or so years ago, and
(00:58):
I remember this book on theinvesting like an endowment,
investing like the Yale model,the Swenson sort of mindset, the
liquidity you know, premiumsand things like that.
So I want you to talk about,first of all, that book from 15
years ago and what exactly thisnew paper is about.
Speaker 1 (01:14):
Yeah Well, to be clear listeners, I didn't tell
Guy that he had to take a redeye.
I mean to me, unless you'regoing to europe or like asia or
something, it's, it's a hard, no, uh so you know, I always say,
I will not relent.
But this bookcase turns into abed, by the way listeners.
So, uh, anyway, um, it'll begood to see you.
(01:37):
Um, yeah, you know, it feelslike two years ago I was talking
to somebody.
I was like, yeah, we wrote thisbook, you know, a two years ago
I was talking to somebody.
I was like, yeah, we wrote thisbook, you know, a couple of
years ago.
And then I was like, wait,actually just kidding, it's like
15 years ago and it was kind ofa spin out, longer version as
my first book and it was a spinout of our first white paper, a
quant approach, tactical assallocation, which is going to
(01:58):
hit, I think, a 20 yearAnniversary next year, which is
insane, and it's now dropped anumber two all time on SSRN.
So we got to, we got to publisha 20 year anniversary so we can
get it back up to number one,but anyway, ivy, what was the
point of that book for those whoread it?
Um, it was like, hey, how do wetake a look at these endowments
(02:19):
which has been crushing it,particularly Swinson?
But Harvard had a great trackrecord, you know, up till that
point, and they were pioneers,really in the 20th century too,
of this endowment style ofinvesting.
We'll talk about what thatmeans in a minute.
But really said, you know, um,what are the benefits of this?
And then what are some thingsthat people can do to try to be
like Yale?
Can we be like Yale?
(02:40):
Um, what are the downsides ofthe endowments?
And we talked about a lot offun tactical studies that Guyad
would love in this book.
We did, we talked about and someof these are more just for fun
but we talked about foreignlisted hedge funds.
If you guys remember, back in2008, 2009, you know, third
(03:00):
Point, greenlight, some, uh,pershing square today, you know
these foreign listed hedge fundscan trade like closed in funds
here.
So you could have bought DanLopes fund at like a 50%
discount to NAV Prettyincredible.
I mean, you can buy.
I think you can still buyAckman's at like a 25% discount
in AV today.
Um, there's some tax issues,but that was a fun part.
(03:22):
We did a years in a row down,like what happens if you buy an
asset class when it's down three, four or five years in a row.
Uh, humorously, since then,we've had a few industries that
have been down six years in arow coal stocks, uranium stocks
over the past decade and thisyear for the first time, I think
.
I mean, it's a tiny subindustry, but cannabis stocks
(03:43):
are down nine years in a row andwe manage a cannabis fund, so
we totally understand that.
Speaker 2 (03:51):
And you're keeping it going.
Man, I give you credit.
Speaker 1 (03:53):
Yeah, well, we're going to be the only one left
standing.
Eventually.
You know, everything goes down99%, we'll be the only ones left
, but we've been helped becausewe've got a lot of tobacco
companies in there.
So, anyway, and uh, we've beenhelped cause we get a lot of
tobacco companies in there.
Um, so anyway, and tobaccocompanies, oddly enough, have
been ripping for the past year.
Um, most of what I'm talkingabout is not related to
endowments, but so what was theoriginal?
(04:13):
What does it mean to be anendowment, endowment, investing?
So, first of all, endowmentsare sort of like you and I and
sort of different.
The first thing, you knowthey're tax exempt.
Maybe not for long it's newadministration, who knows but
we're currently tax exempt, soyou can do other things.
If you're tax exempt, you don'thave to worry about pesky taxes
.
Second is their time horizon isliterally kind of forever.
(04:34):
So let's say, you're Harvardand Yale.
I mean, you do have currentstudents, you have current
administration employees, butalso you have future students
and future ideas, and many ofthese endowments have grown to
be $10, $20, $30, $40, $50billion, and so the amount of
returns and interest they spinoff is non-trivial.
We may see a scenario and thisis a sign of the times, too,
(04:56):
that Texas endowment is reallycompeting to get close to being
the largest in the worldhopefully largest in the US,
excuse me, soon, anyway.
So what have these endowmentsdone historically?
Well, they've historically beenequity focused.
And what does that mean?
Because they have a long timehorizon, their number one enemy
(05:17):
is inflation and bonds.
Historically, you don't get awhole lot of step up premium
over inflation, right, you get alittle bit extra returns
Equities historically.
The problem with equities, ofcourse, is they're volatile.
You can lose 50%, createdepression, you lose 80%, things
like that.
They also diversify.
If you look at the portfolios,it's not just US stocks, s&p,
(05:38):
it's global stocks, it's globalfixed income, global real assets
.
And then the biggestdifferentiator between you and I
is usually the alts bucket, andhistorically that's meant a lot
of different things.
Harvard, back in the day wasearly in September.
Yale has been famous for itsprivate equity venture capital
(05:59):
allocations.
If you look at the Yale annualreport and you're like, oh my
God, meb Gaiad, they got 2% inUS stocks.
Are they crazy?
Well, and you're like, oh myGod, meb Guy, like they got 2%
in US stocks.
Like, are they crazy?
Well, you're like, well, theygot like half in private equity,
VC stocks in general.
So you know those are stillquote businesses and stocks.
They're just privately traded.
(06:19):
So anyway, in this book we saidyou know, could we, um, could we
come up with a public portfoliothat tracks the endowments?
And how does it do?
What can we do to improve it?
Now, the biggest, probablyAchilles heel of the endowments
that came out during thefinancial crisis was illiquidity
.
So if you're managing for along-term time horizon but you
have short-term cash needs andor a short-term part of the
(06:42):
portfolio that's super liquid,that's a huge part of the
portfolio, and all of a suddenyou have capital calls et cetera
, you can get in deep troublequickly and a lot of them did.
But once you burn your hand onthat stove, you learn how to
manage your cash flows andilliquidity better.
Anyway, we decided to write apaper recently called Can we All
Invest Like Yale?
(07:03):
It's on the camryinvestmentscomwebsite.
We'll kind of talk a little bitabout it today.
But, walking forward, you knowthe past 15 years since
publication of this book.
What's changed?
What's the same.
I mean, I think the biggestthing is arguably the greatest
of all time of capitalallocators in our lifetimes.
David Swinson passed away, youknow, and his, his helm during
(07:25):
this time at Yale from 1985 to2021, is is, you know, one of
the best, best streaks inhistory.
So we can get into parts of theparts of the paper how that
applies to everything today.
That's just kind of the generaloverview of the old book and
what's going on.
Speaker 2 (07:42):
Yeah, there's this concept out there that when a
research paper comes out or whensome book comes out documenting
some investment strategy orstrategies, that whatever alpha
was discovered in the researchbehind that suddenly goes away.
Right Now it's in the publicdomain.
How have endowments in generalperformed, you know, following
(08:08):
that book?
Yeah, especially in the QE3Zerp era to where we are today.
Speaker 1 (08:13):
We got a bunch of links in the in the appendix of
our paper to a bunch of otheracademic papers.
A lot of people written aboutthis.
You know the period, sort ofpost-2000 decade, really golden
era of endowments, but saiddifferently, it was a golden era
of anything that's not the S&P.
So, financial advisor man, youdid amazing during the mid-2000s
(08:39):
because REITs did great, golddid great, bonds did great.
Small cap did great Gold didgreat, bonds did great.
Small cap did great Value didgreat, on and on and on.
Private equity VC did great.
Everyone got hammered in 08,with exception of trend and
managed futures.
Anyway, since then, what'shappened?
We've talked about this on aprevious stream.
S&p has crushed everything.
It has just been an absolutehaymaker just 15% per year.
(09:03):
And that doesn't mean thatallocations have done poorly.
And we look at different timeperiods in this paper.
And so one of the big takeaways,by the way, is everyone wants
to look like Yale, right?
So every endowment, everypossible institution CalPERS,
who I love to pick on everyonetries to gravitate towards this
endowment model of investing.
(09:23):
But if you look at Yale versusthe average endowment back to
1985, and these, by the way,listeners, all these
institutions, for some unknownreason, report their fiscal year
ending June 30th.
So if you look at some of thecalendar year metrics they won't
quite match up.
But the average endowment did8.8% per year.
(09:44):
Solid.
That's a great return.
Did it with reasonablevolatility 10% a year.
Again, you're only looking oncea year, so it kind of masked
some of those entry yeardrawdowns.
Sharp ratio 0.5.
Worst year 20%, greatallocation.
But instead of 8.8, yale didover 13.
That is a big fat difference,right, A little more volatility.
(10:06):
Sharpe ratio up around 0.8.
So solid Sharpe ratio, butworse year a little higher.
And then 60-40 did 10%, s&p did11.8.
So S&P and 60-40 beat theaverage endowment, and let that
sink in for a minute.
So these endowments, theseinstitutions, have access to the
best money managers in theworld, they have the most
(10:26):
resources, and CalPERS is theone that we often talk about
here.
But they can't outperformessentially a basic buy and hold
allocation, which is why weoften say, calpers, you should
just fire everyone.
I've offered to be the CIOmultiple times for free.
Fire everyone, buy some ETFsand be done with it.
But they chase this elusivecarrot of trying to be like Yale
(10:48):
.
And so the question we ask inthis paper is like is there
something special in the waterin New Haven, or can we
replicate some of what Yale'sdoing?
Swenson himself in one of histwo books.
He wrote two fantastic booksPioneering Portfolio Management
and Unconventional Success.
I think it may have justmurdered the titles, but in his
books he says look, here's whatindividual investors should do.
(11:11):
They should put 20% in usstocks, 20% in foreign stocks,
10% emerging markets.
By the way, listeners just hearwhat he said.
He said 30% in foreign andemerging, 20% in us.
No one does that, by the way,right?
Everyone's like all us S 20%REITs, 15% US bonds and 15% tips
.
Okay, solid allocation.
We tested this out in our globalasset allocation book, which is
(11:34):
free online.
We also teased out theallocations in the Ivy portfolio
book where we said let's takeout the hedge fund component
they call it absolute returnbecause that can mean all sorts
of different stuff and we'lljust call private equity venture
capital stocks and then we'llnormalize the portfolio.
And that ended up being 50%stocks, 15% fixed income, 35%
(11:58):
real assets almost identical toSwenson's portfolio.
So these portfolios and wecalled one in the book and the
paper Ivy, which was just foryou guys know me, I love
simplicity and rounding, so Isaid 20% in each in US stocks,
foreign stocks, bonds, reits,commodities, just trying to
simplify.
And anyway, the point of allthis is, if you looked at these
(12:18):
portfolios that we, that youknow these kind of investable
benchmarks that cost zero, andtake it back to 1985, you end up
so remember the averageendowment 8.8, yale 13, you end
up at 9.6.
So better, better than theaverage endowment, better Sharpe
ratio, and largely because theaverage endowment just pays more
(12:42):
in fees.
Ennis, who writes a lot aboutthe endowments, is very critical
about their attempt to try tofind this elusive alpha.
He says, look, they pay like 3%for these private allocations
and he calls it I love thephrase an impossible burden,
anyway.
So Swenson and the beta doesn'tquite get there right.
(13:06):
So it's good, look, 10% returns.
Everyone like there's nothingwrong with that, but it's not
quite Yale.
Better than the average now,but not quite Yale.
So we said, look, can we try toattempt to do some things?
And I get that this ishindsight bias.
We understand fully that thiswe're looking back I mean
Swenson and Harvard back in theday.
(13:29):
Harvard's also a case study ofkind of not what to do.
By the way.
The impossible task of allthese different hands being in
the cookie jar.
All the alumni is like this isintolerable, we can't take this.
They're underperforming,they're doing a terrible job and
(13:49):
then if the endowment doesgreat, they're like they get
paid too much.
It's really funny to watch andover the years, if you search my
blog for Harvard, you can findall these articles.
Anyway, but the biggest alphais they made these decisions at
the time, right.
So Swenson, the fact that hedecided to do private equity and
VC in the 80s and 90s right.
(14:11):
That decision has a massiveamount of alpha versus today.
When everyone does it today Onand on, it's like this
transition from former alphasources which you referred to,
right.
Like there's a trade right nowthat I love that I can't talk
about because it's a direct arbwhere the more people in, the
(14:34):
worse it gets, and longtimefollowers of me can probably
guess what this is for 2025because we've talked about it
before.
But I don't want to talk aboutit because every person I
mentioned it to it makes thetrade worse.
But that's the same thing withyou know kind of what they've
done and what what Swinson hasdone.
Speaker 2 (14:51):
Well, which, by the way, I mean it's just a classic
argument of you know you need to.
You get out for inefficientmarkets and the more
accessibility anddemocratization there is of I
had an old buddy, peter Mladina,who is a Northern Trust super
(15:13):
smart guy.
Speaker 1 (15:14):
He wrote an old paper .
It's basically like can wereplicate Yale, with the full
knowledge that they kick ass atprivate equity in VC?
It's massive alpha.
And so, you know, can wereplace all the equities with
stuff like shareholder yieldvalue?
You guys know I love momentumfactors, so we went through this
(15:35):
in the paper and said we calledit Swenson plus, you know,
taking a factor approach.
And so it adds like a percent ayear, which is kind of what we
expect.
If you replace your equities,take away market cap weight and
you do something like value orfactor base, but it does still
doesn't quite get you to thatmagical 13%.
But if you know anything aboutprivate investing is many of the
(15:57):
funds are either implicitly orexplicitly leveraged, right?
If you do private equity, thosedeals are leveraged.
By the way, if you just investin stocks the S&P 500, those
companies are leveraged, right,they have debt on their balance
sheet.
If you do derivative strategies, you do long short equity, you
do all sorts of these variousstrategies.
Many have embedded leverage.
(16:18):
So we said, well, could we addsome leverage to this portfolio?
And where does that take us.
So the good news is it can getyou up to that 13% return.
Good news is it can get you upto that 13% return right.
So you leverage it about oneand a half times.
So 150% gross takes you up toalmost 14%.
(16:39):
Now of course, the volatilitycomes up and a lot of people
like to argument that, arguethat a lot of the private
investments tend to smooth thereturns.
Right, if you own a bunch ofbuildings downtown Manhattan,
you own a bunch of privateequity like you don't have to
mark those every day.
And Cliff Haslund and otherstalk about this volatility
laundering.
It's one thing.
If you have a private equityfund and say it's, you know, hey
(17:00):
, look, this is probably 20% vol.
But if you're marketing and Isee these like you guys don't
send these to me, marketers,cause I will just call you out.
But if you're like, hey, thishas 5% volatility, I'm like no
one believes that.
You know it doesn't have 5%volatility.
I know it doesn't have 5%volatility.
And here's a fun proof Pacerjust launched a private equity
venture capital replication ETFand to achieve the returns of
(17:23):
private equity in VC, you knowhow much that thing is leveraged
Two and a half times.
So the leverage is not just not15% or not seven, it's like 40.
So, anyway, so you mask alittle bit of the volatility.
But in this paper we say, look,we replicate these return
(17:43):
streams and the worst yearcharacteristic for Yale was like
minus 20, but entry year wasdown 50, right.
So very similar to assetallocation portfolios 08, 09.
So, anyway, we think you canget to that 13% alpha number
with leverage.
The volatility I think it'stolerable, right, 18% sharp
ratio is decent, it's not likeone or two.
(18:04):
And like we show in the paper,we're like look at this most
recent period where you know USstocks from like.
Look at this most recent periodwhere you know U S stocks from,
um, you know, uh, what is this?
Uh, you know 2010 to 2024 of asharp ratio above one.
If you're a hedge fund, you'remarketing that for the past 15
years you're a billionaire,right, so, um, but anyway, you
know it's, it's, it's anaggressive allocation strategy.
(18:27):
It's not something that I thinkyou would expect to say, hey,
look, this is never going tolose money, this is never going
to go down, but you know it's,it's, uh, it's got a little
spice, but it's globallydiversified.
And if you have a time horizonand you're honest about it.
You're like no, look, my timehorizon is 20, 50, a hundred
years no-transcript portfoliosover time.
(19:24):
They all do about the same andyou know, it doesn't even matter
how much this is.
This was kind of the hugetakeaway from our global
allocation book.
If you're just doing buy andhold now, you have to have all
the main categories.
If you totally leave out one ofthe main categories and I'm
talking about global stocks,global fixed income and global
real assets usually it'ssuboptimal.
(19:46):
So you can't just leave outreal assets, because the 70s
would have just woodshedded youRight, um, but, but but.
Then it doesn't matter exactlyhow much.
Should you have 5% in gold or10%, doesn't really matter um,
on and on, so, um, over the fullcycles in our and we're going
to update this book and take itback to the 1920s as opposed to
1970s of our first book Um.
(20:11):
However, the path is differentand the reason that people sweat
asset allocation so much and sooften is that, despite the fact
they all end up the same place,they all do like eight, 9% per
year or, said differently, like5% above inflation over time,
but they wiggle a lot in themain term.
So like that, if we looked at,like these 10 portfolios in the
book, the spread between theworst performing and the best
performing each year averagedlike 20%, right.
(20:33):
So some years like 2022, or1970s, 2008, 2009,.
You'll have some portfolio thatcrushes it and some that does
terrible, which causes people tobehave poorly, but over time it
doesn't matter.
But things like permanentportfolio did great, and
permanent portfolio isinteresting because at its core,
if you just did 25% each instocks, bonds, gold and cash I
(20:56):
think was the original idea it'sone of the few portfolios, I
think, that had real positivereturns in each decade, so it's
incredibly stable.
But because it has so much infixed income and cash, it's
lower vol.
So really to get higher returnsfor that portfolio, you need to
lever it up.
Mark Faber no relation has asimilar portfolio that's also
(21:20):
done really well, but so they'reall kind of similar.
To do things where you're goingto be kind of different, you
need to move further afield, andso we talk about value as a big
one.
But the big one for us is trendfollowing right, and so in this
endowment portfolio we show anadditional chart.
We say what if you lob trendfollowing into this allocation?
And, not surprisingly, it doeswhat you think it would do,
(21:40):
which is reduce volatility anddraw down to the rest of the
portfolio for, like, atraditional managed future style
allocation, but all theseportfolios are great.
You know, that's the thing Iwas like.
The takeaway from this paper isnot everything sucks and
everything's good.
All these portfolios are good.
Yale has just happened to begreat, and so will they remain
(22:05):
to be great.
Speaker 2 (22:07):
But hold on.
That's interesting, right?
Take the name Yale out of it.
In any data set you're going tohave anomalies, right?
I mean, is it just luck, is itjust an anomaly in the data set,
or is it Yale doing somethinglegitimately different?
According to the Nazi toolbar,even Yale has been.
Speaker 1 (22:24):
There's no question Yale has been special.
But then you look at, so one ofthe fun takeaways from our
paper.
We talk about this and I go andI'm going to just read it here.
So, as investors review thetables in this paper, many will
come to varied and possiblyopposite conclusions.
As the old wall street sayinggoes, that's what makes a market
.
I go, some paper, some, someinvestors will read this paper
(22:47):
and conclude the best way toinvest is just to buy us stocksS
, stocks, call it a day.
So for the past 15 years, 60-40has beaten everything.
You look like a moron If youjust went to sleep 2009,.
You're like I'm just going tobuy stocks.
Dollar cost average in seey'all in 20 years.
God bless you.
You beat almost everybody,no-transcript.
(23:32):
And here's another quote fromWilliam Feather.
He says one of the funny thingsabout the stock market is every
time one person buys, anothersells and they both think
they're astute.
And so the same thing withallocation is everyone looks at
this and they're like, oh okay,well, clearly you should just
60-40.
So, yes, do I think Yale's beenspecial?
I do, but clearly you shouldjust 60-40.
So, yes, do I think Yale's beenspecial?
I do, but the million dollarquestion like will they be
(23:53):
special going forward?
Will they still be able tomagically command amazing terms?
Will they still be able to findincredible managers with much
more competition?
Was it just David Swenson, youknow?
Can his team replicate what hedid On and on?
So in Harvard, you know, it'skind of shown that the structure
and the people really matter,because they've been a basket
case and a lot of the smallerendowments over the past 10 to
(24:17):
15 years have outperformed,largely because most of them
just put it mostly in US stocksand market cap weight.
So the cycles, as you know andI know, they can outlast you
know our careers and they lastmuch longer than we often expect
.
So my point is you can kind ofget a lot of the way there with
just smart allocation, spread itout, add a little leverage and
(24:40):
then throw in some good ideaslike value and trend as well.
Speaker 2 (24:46):
Speed value and trend Value really hasn't had much of
a trend.
Yeah, Largely because of techright being the main driver of
the trend, and that's moregrowthy Well it's interesting.
Speaker 1 (24:55):
There's some areas of the world where it's, you know,
if you look at foreign andemerging and we posted a good
chart to Twitter not too longago from Goldman and it showed
that European banks haveoutperformed the MAG-7 since
2022.
Now it's obviously acherry-picked time horizon, but
it's interesting and Europe'sdoing great this year and a lot
(25:16):
of the cheap global countriesare up well into the double
digits.
So will that rotation last?
Usually, the foreign rotationlasts about a month, so we're
getting long in the tooth herefor US stocks to just come back
and start waxing everything.
But you never know.
Um, the cool part about thiswhole day idea, you know, is um,
I wanted to take out a hugebillboard in front of CalPERS
(25:38):
headquarters in Sacramento andsaid you know what?
You guys forced my hand.
I tried to help you.
I applied for your CIO jobthree times.
You wouldn't even, uh,recognize me with a turning me
down.
Uh, you know, you wouldn't evenstart.
You wouldn't even recognize mewith a turning me down.
You wouldn't even have me foran interview.
So you know what?
Let's make this a bet.
(25:58):
I'm going to launch an ETF.
Just a low-cost ETF publiclytrades everything.
See what's in it and let's findout.
Can you beat me?
We're going to find out.
I might have to take it out andadd in Barron's and say, look,
let's find out.
And so, anyway, we're launchingEndowment ETF in April, so
right around April 10th.
We're putting this to work inthe real world.
(26:22):
So this is going to be aleveraged aggressive allocation
with ETFs, no management fee andonly the underlying fees of the
ETFs in the component.
And we'll see.
Every June 30th.
Maybe we'll hold a party andsee if the institutions can keep
up with this low-cost,investable benchmark.
And my offer stands CalPERS,happy to come run it for you.
Speaker 2 (26:47):
A lot of alpha comes from rebalancing, typically
right.
So talk to me about rebalancingon the endowment portfolio,
Swenson's a big proponent ofthat.
Speaker 1 (26:57):
You know we call it rebalancing alpha it.
More than anything, I think itjust keeps you on track of your
process, and for someone whobought 6040, say, in 2009,
you're not 6040 anymore.
For someone who bought 60-40,say, in 2009, you're not 60-40
anymore.
You're probably I don't evenknow what 80-20 at this point,
and so rebalancing matters.
As long as you do it sometime,I don't think you need to be
(27:21):
super sophisticated about it.
It's just that you need to doit if that's what your mandate
is and that's what I think isimportant about this type of
strategy.
So the more components and thevaried they are, probably the
less you need to rebalance.
But if you have things in therethat are super volatile so like
, look, you got a bunch ofbitcoin in there um, you know,
if you had a big bitcoin 60, 40gold's, now creeping on 3000 are
(27:45):
we there yet?
I don't think so, getting closeanyway, um, but yeah, I, I mean
investments that that arevolatile and then make these
huge runs you have to rebalanceor else you end up owning and
that's the whole Achilles heelwith market cap investing right
Is you end up owning the mostexpensive things at the worst
possible time to own them.
So you put most of your moneyin Japanese stocks in the
(28:05):
eighties.
You put most of your money inexpensive us stocks in the late
90s.
If you can break that marketcap link, I think it makes a lot
of sense and it's thoughtful.
So, yeah, these will rebalanceAgain.
I don't think you don't have todo it like once a week, once a
month even.
I think even for most peopleonce a year probably gets you
there.
But the nice thing about buyinga basket of ETFs is they
(28:26):
rebalance for you.
They do the work you know.
So if you're investing in ashareholder yield ETF, it's
going to rebalance quarterly.
If you invest in somebodyelse's whatever equal weight ETF
, it may be rebalanced onceyearly.
But they kind of like do allthe work behind the scenes, the
baking and cooking.
Speaker 2 (28:43):
You must be itching to see a value cycle, right, I
mean because I'm going to makethe assumption that the majority
of the funds under Cambria havethat, that tilt.
Speaker 1 (28:52):
So the older.
When we first started launchingfunds in 2013, you know I would
sweat what the market was doing.
I would pull up my phone, Iwould count the basis points,
right, we have 16 funds now,that kind of zig and zag, and I
fully have the understandingthat of those 16.
I mean we have US, we havelarge cap, we have small cap, we
(29:13):
have foreign, we have emerging,we have REITs, we have fixed
income, we have tail risks, wehave allocation, we even have a
crazy cannabis fund on and onRight.
So, uh, we have some, somehedged funds.
It's a pretty diverse lineup,and so that's good and it's bad.
It's good that you know usuallysomething is doing well.
It's bad that usually somethingis sucking it up too.
(29:35):
That all having been said, youknow, the worst, probably on a
relative basis market for us isS&P just creams everything.
Now it's good in the sense ourlargest fund is the US stock
fund.
So if the US stocks double fromhere, good, that's fine for us.
But on the trend side, webenefit from trends anywhere,
(29:57):
and so the trend in US stockshas helped all the trend funds.
No trends elsewhere has hurtthem, and whipsaw and sideways
markets have hurt those.
So it varies.
But yes, I mean, look as a quantand someone who follows the
value trade we definitelybelieve that value is in the top
decile of attractiveness tohistory.
(30:17):
That overlaps with some otherthings like small caps, mid caps
versus large cap.
Basically it's a it's a largecap, expensive, concentrated
story.
But everyone knows that, like Ifeel like that's well known and
people are kind of just dancingaround musical chairs waiting
for the music to stop.
And so part of me you know I'mstudent of bubbles I love uh
market history.
So we've now taken out on thecape ratio the um uh 2021 high
(30:47):
of at least intraramont of theCAPE ratio.
It was like 38 and change, Ithink, and so now we only have
the final boss 1999, left totake out.
So part of me wants to justtake that out because I never
thought I'd see it again in mylifetime Forget 20 years later,
(31:08):
right, 25 years later.
So part of me wants to see itgo totally nutty.
But the rest is waiting for areturn to sanity.
Speaker 2 (31:19):
Any chance at all that this time is actually
different just because of theautomated passive flows and smp
large cap that's.
Speaker 1 (31:25):
That's been well documented too, and yeah, hard
to disagree with it yeah, um,the problem with that argument
that I've always struggled withis that should be true
everywhere, and and so, um, Iget it and I think it's
reflexive.
I think it's true in sectorfunds, I think it's true in
(31:49):
active funds.
I mean, we saw it with Kathywood.
You know what helps you on theway up, it's going to hurt you
on the way down when it comes toflows and uh and and same thing
with sectors, on and on, Ithink it creates opportunities.
I mean, that's, that's howcountries get to single digit PE
ratios and how countries get to40, 60 PE ratios.
Right, it's like these, thesemanias and booms and bus, Um,
(32:13):
but eventually, you know there'sgravity takes hold.
It's just how far that rubberband gets stretched, and so,
like, could this last for a longtime?
Sure, you know it's.
It's just how far that rubberband gets stretched, and so
could this last for a long time?
Sure, it's happened.
If we look back in history Ithink you and I talked about
this before there's been fourperiods where stocks have done
15% per year for over a decade.
Now again, they're all in thehistory books, though they all
(32:33):
have names, and eventually theyend.
Now, sometimes they end quickly, like the 1920s and 30s.
Sometimes they end now.
Sometimes they end quickly likethe 1920s and 30s, sometimes
they end in a different way.
You know, the 1970s, the nifty50, set the stage for really an
inflationary, massive run-up inbond yields.
Very different market.
(32:54):
The 1970s, um, and then 1990stotally different too.
I mean that lasted three kindof slow rolling years, um, so
they're all different, I think.
But you know, we've seen it inforeign markets a million times
and it and it's um, it, uh.
The bricks back in 2007, indiaand China were trading, p ratio
(33:16):
is like 50.
Like 50, so higher than the uswas in 99 and and so, um, we're
right, like 38, which is, it'shigh and I think it's really
expensive and there's pockets ofsuper concentrated.
But to me it's not bubble.
Bubble to me, I mean, I've comeup with a very generic
arbitrary line in the sand is a40 pe, uh, but we're not, we're
(33:38):
knocking on it.
But.
But the good news is, you know,salesmen and me, we have a
solution for that.
Just wait, there's more.
But so a lot of people have been, you know, invested in us
stocks.
A lot of people have highlyappreciated us stock positions,
but they're kind of stuck.
You know they say I can't doanything with my video, I can't
sell it, taxman's going to killme.
And so historically there'sbeen very few choices for those
(34:02):
type of investors how they cansort of move out of their highly
appreciated investments.
And we've finally come up withone and we talked about it, I
think, on one of these before a351 conversion.
So for this endowment ETF, youcan buy it after it launches,
same as any other ETF.
We're also allowing people tosee the ETF with their own
(34:22):
securities could be stocks,could be ETFs and get the ETF in
return in a tax-freetransaction, which is a pretty
cool innovation that we'restarting to see more and more of
.
So, listeners, if you'reinterested, you can always reach
out to me.
But that's a potential solutionfor a lot of people that are
concentrated and don't know whatto do.
I mean my mom.
Back in the day I would try tohelp her out with investments.
(34:42):
We'd talk about it.
She's like you know, I just ownthis GE, I can't sell it, tax
money is going to kill me.
I'm like mom, market's going tosolve this for you if you don't
sell it Right.
(35:10):
And it's like, eventually, thereception by some advisors, as
you explained, with 351 Exchange.
How intrigued, but it soundslike it's kind of a big
operational undertaking.
In reality it's really not thatbad.
Your client say, hey, explainthis to them, they're okay, sign
a docusign.
And then you just got to getlike an excel file with
positions and tax slot basis, sobasically a download, monthly
portfolio statement.
It's about it.
Um, but again, like it's likegoing to the gym, you know, it's
(35:33):
like every, every blockade youput in is like reduces
compliance by like 90.
So if you tell an advisor, yeah,you're gonna do that for one
person, cool.
You tell an advisor, yeah,you're going to do that for one
person, cool.
If you tell an advisor, you gotto do that for 100, you know,
not so cool.
So for highly concentratedpositions, I think it's been a
big unlock.
You know, for people who havean advisor has a handful of
(35:54):
accounts, I think it's a littleharder for them if they say,
look, we've been doing directindexing and we're stuck in
these frozen, calcifiedpositions after five, 10 years
of parametric and I have 500clients and I really don't want
to go do that work.
However, like it is a massivebenefit to investors If you
think about it if you've beeninvested in taxable accounts for
(36:16):
the past 10 years and all of asudden you're like all US stocks
, like that's the way.
If you look at the percent of US investors net worth allocated
to equities, it's the highestlevel ever and so historically
that's like the number oneindicator for next 10 years
returns.
In the opposite, you know it'sgot like a near perfect track
(36:38):
record as predicting the future.
So people were totally offsides and so that little bit of
effort can really, can reallyhelp.
You know there's two maincriteria.
You can't just give us 100% onestock.
The biggest stock can't belarger than 25% of the portfolio
, so it has to be somewhatdiversified, is what they call
it.
So that's, that's aconsideration to take into
(37:01):
account.
But ETFs are pass-through.
So if you got 25 million NVIDIAand 75 million SPY, that
probably works.
So it's more that no one'sheard of it.
So I gave a speech this week atthe Elks Club in SoCal.
It's actually the certifiedfinancial planner organization.
I actually had two or 300people there, but I said hey,
(37:25):
how many of y'all know what a1031 is?
Every single hand went up,right, no one didn't know what a
1031 would go.
How many of you guys have heardof a 351?
Zero hands went up right.
And these are CFPs Like theirjob is to be on top of taxes.
Financial planning, um, and soI think it's.
I think it's a big opportunityand value add for planners and
(37:45):
wealth advisors to take this toclients.
It's also big prospecting.
So if you're an advisor, Iguarantee you you know someone
who's got 50,.
Look, you can charge on mynormal portfolio, but you're not
charging on this $100 millionof Microsoft because I can't
(38:05):
sell it and there's nothing youcan do with it.
So if you ever find a solutionand can get me out of this,
great.
And so all of a sudden forfinancial advisors unlocking a
huge portion of business andthey never thought they would be
able to touch.
And again, direct indexing isanother one where they've kind
of sold this solution, but thenafter a certain number of years
they're like whoops, justkidding.
(38:26):
Now there's nothing to do withthis portfolio.
Now there's a solution for thattoo.
So we're excited.
We have endowment's going to bein April, we have another one
probably August, september.
Then we're going to kind of seewhat people want from there.
Everyone says they want USstock market beta right now and
I tell them I said you waitabout a month or two of the US
going down and we'll see if youstill want US stock market beta
(38:49):
after that.
Speaker 2 (38:50):
I made a point that the most contrarian trade now is
that under a Trump presidencyUS stocks ended up being the
biggest laggard.
Speaker 1 (38:59):
It seems like so impossible under trump, but
probably why it happens yeah,well, and that's the thing is,
like everyone, like I thinkpeople what were, what were they
talking about last trumppresident, that everyone just
would have assumed energy wouldhave been like an amazing sector
and I think it like did terror,was it used to.
Might have been you talkingabout this, but it's like.
It's always like what youexpect to happen may not happen.
(39:20):
My favorite part of this waswhen Trump got elected last time
and the futures just startedtanking that night and Carl
Icahn put his martini down andwent and bought 2 billion, and
then you had something like 17months in a row where the U S
stock market was up the firstyear, first calendar year in
history, where the market wentup every month.
So you never know what marketsare going to deliver us, right?
(39:41):
It's always surprising andthat's part of the reason we got
to be diversified and have alot of these approaches and
ideas baked in.
But what's going to happen?
You know the president'sadministrations.
They don't control thevaluation of stocks when they
inherit them.
That's beyond their control,right?
(40:01):
And so you know Trump'sinheriting one of the most
expensive stock markets inhistory, which is a tall order,
but I also think the president'sirrelevant to stock market
returns, but who knows?
Speaker 2 (40:11):
It's also interesting I mean I've seen the studies
that generally under Republicanadministrations the S&P tends to
underperform relative toDemocrats, which is
counterintuitive given tax cuts.
Speaker 1 (40:21):
But it's even funnier because half the time now the
Republicans were Democrats.
You know, it's like who knowswhat.
Speaker 2 (40:27):
Yeah, even the categorizations don't even make
sense at this point.
Speaker 1 (40:30):
Yeah.
Speaker 2 (40:31):
I think it's exactly right, matt, for those who want
to learn more about theendowment portfolio when it's
live, and then the 351 exchange.
I know you're doing a fewwebinars, doing a few webinars,
doing an webinar with me as well.
Yeah, talk to me about sort ofthe different sources people can
educate themselves on.
Speaker 1 (40:43):
If you go to my Twitter account, you can see
somewhere in the feed.
Uh, we're doing a webinarThursday where we're going deep
on this.
Um, you can always email me onCambria funds or Cambria
investments.
There's a lot of information.
Uh, there's three 51.
There's 351 tabs that have FAQs, overview of the approach.
It goes pretty deep.
We got videos, podcasts, allsorts of information to educate
(41:06):
people.
That's much like you.
That's our big calling card.
We want to make sure everyoneunderstands what they're
investing in.
My nightmare is having aninvestor that doesn't know what
they're investing in, and so wespend an inordinate amount of
time trying to educate throughany medium at this day and age.
Uh, go across any possiblevideo text.
Uh, you can email me.
(41:27):
You can find us on LinkedIn.
You can go buy the old Ivyportfolio book.
You can download a zillionwhite papers for free.
There's a million resources.
If you just uh look hard enough, you can find a find all of
them.
Speaker 2 (41:38):
By the way, I give you a lot of credit.
I mean, you know you've got abig firm, you've got a number of
people working for you, butyou're still the guy that's
often out there communicatingthe most and doing one-on-one
meetings.
Speaker 1 (41:49):
As you know, guy, the life of an entrepreneur, it's
all hustle.
Someone asked the NVIDIAfounder and CEO.
I think it was no, was itNVIDIA?
CEO?
I think it was.
No, it was Nvidia.
No, it was no.
Sorry, it was um, it was adifferent profile of a Korean
CEO, but it doesn't matter.
But they said, um, you know howmany hours do you work per week
?
And he answered all of them.
(42:09):
You know, it's like.
It's like the entrepreneurmindset the owner is not one
that you just flip off on Fridaynight and turn back on Monday
morning.
You know it's an always-onmentality, but we love it, like
it's a lot of fun too.
I don't, you know, it's likeWarren Buffett skipping to work,
and so we always never a dullday in our world.
Speaker 2 (42:30):
Yeah, ain't that the truth?
Appreciate those that watchthis.
And, Meb, I will see youtomorrow.
Speaker 1 (42:35):
Great See you bud.
Speaker 2 (42:37):
Cheers.
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